CBO s January Baseline Sets the Stage 1
Trillion-Dollar Deficits Are Returning $1,600 Billions $1,400 $1,200 $1,000 $800 Deficits Increased Almost 800% Deficits Fell 69% Deficits Triple to Nearly $1.4 Trillion $600 $400 $200 $0 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2 Sources: CBO, CRFB Calculations
The National Debt is Rising 95% 85% Percent of GDP Actual Projected 75% 65% 55% 45% August 2015 Baseline January 2016 Baseline Alternative Budget Outlook 35% 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 3 Sources: CBO, CRFB Calculations
The Gap Between Revenue and Spending is Growing 26% Percent of GDP Actual Projected 24% 22% 20% 50 Year Avg. Spending = 20.2% Spending 18% 16% 50 Year Avg. Revenue = 17.4% Revenue 14% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 4 Sources: CBO, CRFB Calculations
Social Security, Health, and Interest Explain the Growth These 3 areas account for 83% of the $2.7 trillion in nominal growth from 2015 to 2026 Health Care, 33% Interest, 22% Discretionary, 10% Social Security, 27% Other Mandatory, 8% 5 Sources: CBO January 2016 Baseline, CRFB Calculations. Numbers may not add due to rounding
The President s FY 2017 Budget 6
The President s Budget Stabilizes the Debt 90% Percent of GDP Actual Projected 85% 80% 75% 70% 65% OMB Baseline FY2016 Budget FY2017 Budget 60% 2010 2012 2014 2016 2018 2020 2022 2024 2026 7 Sources: OMB, CRFB Calculations
.But at Record-High Levels 100% 80% Percent of GDP Actual Projected OMB Baseline President s Budget 60% 50-Year Historical Average 40% 20% 0% 1981 1986 1991 1996 2001 2006 2011 2016 2021 2026 8 Sources: OMB, CBO, CRFB calculations
Budget Projections in the President s Budget 9 ^ Ten-year figures refer to 2017-2026 for all categories except FY 2016 Budget, which is 2016-2025. * CRFB s PAYGO Baseline adjusts OMB s baseline to remove claimed savings from a drawdown of Overseas Contingency Operations (OCO) and to treat the so-called sequester under CBO s conventions by assuming discretionary levels continue at sequester-levels, adjusted for inflation, beyond 2021.
Where Does the Money Come From? Where Does It Go? $4,500 Billions of Dollars $4,000 Interest, $350B $3,500 $3,000 Immigration, $170B Health Care Savings, $445B Other Spending, $85B Deficit Reduction, $2,475B $2,500 $2,000 $1,500 Tax Increases, $3,155B Sequester Relief, $525B $1,000 Other Spending, $485B $500 New Infrastructure Spending, $310B 10 $0 Savings New Tax Breaks, $410B How It's Spent Sources: Office of Management and Budget, CRFB Calculations Measured against a PAYGO baseline which assumes continuation of current law, including inflation adjustments of the 2021 post-sequester discretionary levels, along with a drawdown in war spending as in the President s budget.
New Spending and Sequester Relief in the President s Budget Costs New Spending Initiatives Provide Mandatory and Discretionary Sequester Relief Increase Transportation and Clean Energy Infrastructure Expand Access to Child Care Offer Universal Pre-K and Expand Home Visiting Expand College Grants Increase Clean Energy R&D Spending (Mission Innovation) Reform Unemployment Insurance Benefits and Establish Wage Insurance Other Spending Increases (net of certain savings) $1,250 billion $525 billion ($125b from OMB baseline) $310 billion $80 billion $75 billion $60 billion $30 billion $60 billion $105 billion 11 Note: All numbers rounded to the nearest $5 billion and estimated roughly by CRFB staff. Numbers may not add due to rounding.
Mandatory and Health Savings in the President s Budget Savings Other Mandatory Savings -$85 billion Reduce Farm Subsidies -$20 billion Increase PBGC premiums -$15 billion Enact Postal Reform -$40 billion Reduce Social Security and SSI costs -$10 billion Health Care Savings (net) Reduce Spending on Prescription Drugs Reduce Spending on Post-Acute Care Increase Income-Based Premiums and Expand Cost-Sharing Reduce Medicare Advantage Payments Reduce Other Medicaid Costs Other Savings & Interactions Medicaid and CHIP Spending -$380 billion -$170 billion -$95 billion -$55 billion -$75 billion -$30 billion -$15 billion $70 billion 12 Note: All numbers rounded to the nearest $5 billion and estimated roughly by CRFB staff. Numbers may not add due to rounding.
2016-2026 Annual Growth Rates by Spending Category 7% 6.6% 6% 5.7% 5.6% 5.6% 5.8% 5.8% 5% 4% 3% 2% 2.7% 2.5% 1% 0% Medicare Medicaid Social Security Other Spending Adjusted Baseline President's Budget Sources: OMB, CRFB Calculations Note: Other Spending is non-interest
Revenue Provisions in the President's Budget Savings/Costs Revenue Increases Limit Value of Tax Preferences for High Earners, Enact Buffett rule Tax Capital Gains and Dividends at Top Rate of 28 percent and Repeal Step-Up Basis Rationalize Net Investment Income and SECA Taxes Restore Estate Tax to 2009 Levels and Close Loopholes Impose a Financial Fee Increase Tobacco Tax Repeal or Reform Various Corporate Tax Expenditures and Loopholes Reform the International Tax System, including with a minimum tax Enact One-Time Deemed Repatriation Tax on Income Held Overseas Enact $10-per-barrel Oil Tax Other Revenue New Tax Breaks Expand the Earned Income Tax Credit (EITC) Provide Second Earner Tax Credit Expand Tax Breaks for Child Care, Education, and Other Purposes Expand Business Tax Breaks, especially for Research, Energy, and Infrastructure -$3,155 billion -$685 billion -$235 billion -$270 billion -$225 billion -$110 billion -$115 billion -$225 billion -$485 billion -$300 billion -$320 billion -$180 billion $410 billion $65 billion $85 billion $90 billion $160 billion 14 Note: All numbers rounded to the nearest $5 billion and estimated roughly by CRFB staff. Numbers may not add due to rounding.
What We Like in the President s Budget Abides by PAYGO by paying for all new initiatives Stabilizes the debt-to-gdp ratio Calls for business tax reform and Medicare reform Emphasizes pro-growth investments and includes policies to promote labor force participation 15
Our Concerns with the President s Budget Leaves debt levels at post-wwii record high levels Fails to put debt on a clear downward path relative to GDP Includes practically no reforms to Social Security, and insufficient health care savings Puts too little focus on long-term fiscal sustainability 16
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